WASHINGTON (AP) -- U.S. builders stepped up home construction in May and applied for permits to build single-family homes at the fastest pace in five years. The gains show housing remains a key source of growth for the economy.
The overall pace of homes started rose 6.8 percent last month to a seasonally adjusted annual rate of 914,000, the Commerce Department said Tuesday. That offset part of the 14.8 percent decline in April. May's rate is still below March's pace of more than 1 million -- the fastest in five years.
Construction increased in May for both single-family homes and apartments and condos.
And builders sought more permits to build single-family homes, which make up nearly two-third of the market. The seasonally adjusted annual rate rose 1.3 percent to 622,000 -- the highest since May 2008. That's a sign that construction will increase further in the coming months.
Overall permits fell 3.1 percent in May to a seasonally adjusted 974,000. But that was because of a drop in apartment permits, which are more volatile.
Overall, the report points to more evidence of a housing recovery that has become sustainable. New-home construction has risen 28.6 percent since May 2012.
"Starts have clearly been trending up," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. "While levels are still low, housing has been the strongest part of the economy in growth terms.
Improved hiring and low mortgage rates have encouraged more people to buy homes. The increased demand, along with a tight supply of homes for sale, has pushed home prices higher.
Stronger housing markets are helping the economy grow and offsetting some of the drag this year from higher taxes and federal spending cuts.